Material or Not: Can Failure to Disclose Under S-K Item 303 Give Rise to a Fraud Class Action?

The Second and Ninth Circuit Courts of Appeals are directly opposed on a fine point of securities litigation: whether a failure to disclose a “known trend or uncertainty” under Item 303 of Regulation S-K can give rise to a fraud class action under Section 10(b) of the Securities and Exchange Act of 1934. In a blog essay written for the Delaware Journal of Corporate Law, DJCL staff editor Sabrina Hendershot discusses the circuit split and concludes that although no shareholders have been successful on this potential cause of action, issuers should take great care in deciding whether to disclose certain trends to the SEC to ensure compliance and avoid litigation.


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